The document discusses the business life cycle and the four stages businesses typically go through: startup, growth, maturity, and decline. It explains that each stage presents unique challenges and businesses must adapt their strategies. It also provides details on what occurs during each phase of the business cycle, including how factors like wages, unemployment, borrowing, and business profits fluctuate during expansion, peak, contraction, and trough periods.

1. BUSINESS LIFE CIRCLE

2. Introduction
Every business, whether it’s big or small, goes through the 4 stages of
business growth:
• Startup
• Growth
• Maturity
• Renewal or decline
• Each of the stages of the business life cycle have unique challenges
and businesses need to find creative approaches to overcome them.
• By understanding each of the growth stages, you can find out where
your business currently is in the cycle. This help you to plan for the
future and create an appropriate business growth strategy.

3. Gross Domestic Product (GDP)
• Def. The total value, in dollars, of all final goods and services
produced within the nation each year
What does the GDP tell us?
• If the GDP is larger than last year the economy is expanding
(getting bigger)
• If the GDP is smaller, the economy is shrinking (getting smaller)

4. Gross Domestic Product (GDP)
It is The total value, in dollars, of all final goods and services produced
within the nation each year
What does the GDP tell us?
• If the GDP is larger than last year the economy is expanding (getting
bigger)
• If the GDP is smaller, the economy is shrinking (getting smaller)
• The Business Cycle allows people to understand the direction the
economy (GDP) is going (growing or shrinking) and plan accordingly.
• The economy follows the Business Cycle regularly.

5. Business Cycle
Peak
Trough
Peak

6. Phases of the Business Cycle

7. Stage 1: Start-Up Business
• In the startup phase, you’re spending most of your time and
effort to bring your business idea to life. You’re likely trying to
get the word out about your product or service, while balancing
other key responsibilities. As a startup, it’s not uncommon for
you to wear many different hats to get your business up and
running.
To take your business to the next level, you need to make sure
your company is efficient and has a system in place to follow for
growth. This means you are :
• Hiring employees
• Knowing how to delegate tasks
• Establishing a creative culture

8. Stage 2: Growth/Expansion
Your business plan is paying off. Consumers know about your product
or service. Your revenue is increasing. Your business has less
turnover. And your market share and customer base are growing. After
being in business for a few years, your company is going through
rapid growth.
• Staying focused on your business goals in this stage can be
challenging. It’s a good idea to:
• Set goals that let you grow with purpose, so you’re using your
resources in the most effective way.
• Maintain capital, because without it, you won’t be able to meet
financial obligations.
• Create realistic, accurate forecasts to help drive your goals and stay
on track.

9. Stage 2: Growth/Expansion cont…
• During a period of expansion:
• Wages increase
• Low unemployment
• People are optimistic and spending money
• High demand for goods
• Businesses are expanding
• Easy to get a bank loan
• Businesses make profits and stock prices increase

10. Stage 3: Business Maturity/Peak
• This is the safest and securest phase. It’s a different feeling than the first two stages in the
business life cycle. The startup phase was risky, because you didn’t have an established
product or service. And in the growth stage, you had to manage how your business grew
so it still accomplished its goals.
• Mature businesses have more brand awareness with consumers, and a strong presence
in their target market. It’s unlikely a startup or business with less experience can take over
your company’s position.
• So, with a strong cash flow and the ability to quickly address issues that may come up,
what makes the maturity stage challenging is the biggest risks of staying stagnant.
• As a mature business, your company has a chance to expand. You can increase your
market penetration to ensure a larger percentage of customers are using your product or
service. Or you may want to develop new products to tap into a new market. For some
business owners, the maturity stage may bring thoughts to sell, merge or buy another
company to expand.

11. Stage 3: Business Maturity/Peak cont…
• While every business wants to avoid a decline, it’s bound to happen to
almost everyone. This can happen for a variety of reasons, such as:
 Not pursuing opportunities to expand during the maturity stage
Changes to the industry affecting customer demand
Competing businesses having better products or services
Not reacting to technology updates or advances
• If your business has seen several years of dropped revenue, you’re in a
decline. That’s why it’s important to regularly look at your finances.
• When your business is in this stage of the life cycle, you have two
choices: sell or reinvest. If you decide to sell, you’ll want to work with the
right people to make sure you’re following state and federal finance laws.
• Reinvesting in your company can result in its renewal. Ideally, you want to
start this process before your business is in a decline. For example, if you
notice there’s a change in the industry, modify your strategy. If your
business is already in a decline and you decide to reinvest, you’ll want to
quickly find out how you can address the new needs of your target market.

12. Stage 4: Declining/Contraction cont…
While every business wants to avoid a decline, it’s bound to happen to almost everyone. This can
happen for a variety of reasons, such as:
• Not pursuing opportunities to expand during the maturity stage
• Changes to the industry affecting customer demand
• Competing businesses having better products or services
• Not reacting to technology updates or advances
• If your business has seen several years of dropped revenue, you’re in a decline. It’s important to
regularly look at your finances.
• When your business is in this stage of the life cycle, you have two choices: sell or reinvest. If you
decide to sell, you’ll want to work with the right people to make sure you’re following state and
federal finance laws.
• Reinvesting in your company can result in its renewal. Ideally, you want to start this process before
your business is in a decline. For example, if you notice there’s a change in the industry, modify
your strategy. If your business is already in a decline and you decide to reinvest, you’ll want to
quickly find out how you can address the new needs of your target market.

13. Stage 4: Declining/Contraction
• During a period of contraction:
• Businesses cut back production and layoff people
• Unemployment increases
• Number of jobs decline
• People are pessimistic (negative) and stop spending money
• Banks stop lending money

14. Trough
• When the economic cycle reaches a trough:
• Economy “bottoms-out” (reaches lowest point)
• High unemployment and low spending
• Stock prices drop
But, when we hit bottom, no where to go but up!
UNLESS….

15. Recession/Depression
• A prolonged contraction is called a recession (contraction for
over 6 months)
• A recession of more than one year is called a depression

16. What keeps the Business Cycle Going?
4 variables cause changes in the Business Cycle:
1. Business Investment
When the economy is expanding, sales and profit keep rising, so companies invest in
new plants and equipment, creating new jobs and more expansion. In contraction,
the opposite is true
2. Interest Rates and Credit
Low interest rates, companies make new investments, adding jobs. When interest rates
climb, investment dries up and less job growth
3. Consumer Expectations
Forecasts of an expanding economy fuels more spending, while fear of a recession
decreases consumer spending
4. External Shocks
External Shocks, such as disruptions of the oil supply, wars, or natural disasters greatly
influence the output of the economy

17. Why should you care about the business
cycle and economy?
• Help to frame appropriate policies
• Make Strategic Business Decisions
• Greatly Affect Cyclic Businesses
• Entry and Exit from Market
• It has an influence on consumer demand

18. Leadership and Management skills necessary
for a successful business
Tactics to help discover and evaluate:
• Critical thinking: Describe what works & doesn’t and evaluate
strategies to overcome challenges
• Strategic thinking: What are the questions? $$$ needed in personal
assets to start biz? This than what?
• Organizational: Describe efficiency and waste assumptions
• Financial: Ratios, metrics, & relationships to understand business
assumptions
• Administration: Roles and responsibilities descriptions
• Management: Style, culture, & goals description

19. Challenges faced by Small Businesses
• Lack of credit history
• Limit of personal assets (impact when starting, financing,
growing)
• Lack of business experience (client’s cooking = a great
restaurant?)
• Lack of industry knowledge (challenges to start and grow?)
• Lack of network/connections and understanding of the
economic environment (Counselor’s role)
• High cost of goods
• Lack of customers
• Lack of cash
• Lack of qualified employees
• Lack of time

20. Challenges faced by Small Businesses cont…
• Lack of efficiency
• Lack of commitment
• Inability to admit making mistakes
• Failure to match their abilities, interests, personalities, and
needs with needs of their business ventures.
• Lack of planning.
• Poor marketing and market research (which resulted in
failure to correctly identify the target market).
• Poor financial planning and money mismanagement.
• Attempting too many tasks at once.
• Failure to set and revise goals (to reflect changing nature of
the business.)
• Personal reasons (illness, accident).

21. Business development strategies for
entrepreneurs
• Financial contributions
• Supporting local causes
• Understand your competitive landscape.
• Choose effective KPIs.
• Develop long-term customer relationships.
• Implement customer feedback.
• Keep your website content and user interface fresh.
• Speed up your response time.
• Leverage a sales plan to identify areas of growth.
• Implement a social listening strategy.
• Sponsor industry organizations, conferences, and events.

22. Functions of Management of a Small Business Owner
• Direct and control the company
• Manage resources (equipment, capital, labor, and all input
resources and materials)
• Manage cash flow and investments
• Deal with internal and external forces and mitigate their impact in
the company
• Responsible for the performance of the company
• Manage efficiently by controlling wastes and expenses
• Communicate with customers, suppliers, and employees on behalf
of the company
• Carry on requirements, rules and regulations of the business
industry
• Ensure that the company meets the law
• Understand the legal aspect of the business

23. Some Common Reasons for Entrepreneurial Failure
Lack of commitment
Inability to admit making mistakes
Failure to match their abilities, interests, personalities, and needs with
needs of their business ventures.
Lack of planning.
Poor marketing and market research (which resulted in failure to correctly
identify the target market).
Poor financial planning and money mismanagement.
Attempting too many tasks at once.
Failure to set and revise goals (to reflect changing nature of the business.)
Personal reasons (illness, accident).

24. Practicing questions
• What phase of the business cycle do wages go up?
• Expansion
• What phase of the business cycle do wages go down?
• Contraction

25. Practicing questions cont…
• When are wages at their highest?
• Peak
• When are wages at their lowest?
• Trough

26. Practicing questions cont…
• When will borrowing decrease?
• Contraction
• When will borrowing increase?
• Expansion
• When will borrowing be at it’s lowest?
• Trough

27. Practicing questions cont…
• When will unemployment be at its lowest?
• Peak
• When will business profits be the highest?
• Peak
• When should you look for a new job?
• Expansion

28. Practicing questions cont…
• A firm should look to expand its workforce during a contraction
phase. True or False?
• The given statement is False. During contraction, the supply of
goods is more than the demand. Increasing the workforce will
only add to the already high production cost. The workforce
may be added during the Expansion phase to keep up with
demand and increase profitability.